Why do Central banks fear Bitcoin?

Central banks are not usually positive when they hear the word Bitcoin and cryptocurrencies. Although some positive news has been reported lately, overall sentiment regarding Bitcoin remains rather negative.

Probably the most common argument that we can hear in connection with Bitcoin is that this has no intrinsic value. This raises the question of whether this form of money can ever have a tangible value. Although Bitcoin has a market price, this is considered more as a bubble. Many argue that the value behind BTC is the amount of work required to mine Bitcoin and the huge Blockchain infrastructure.

There have certainly been many ups and downs in the last nine years. There seems to be a downward trend every year before the Bitcoin price regains momentum. In the course of 2018, this downward trend has clearly made itself felt and greatly reduced the value of one Bitcoin.

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The lack of centralization is often an issue. More specifically, there is no central developer, company, bank or government responsible for maintaining the world’s leading digital currency. It is a whole new way of looking at the whole concept of money that a central bank still faces today. When it comes to financing, it’s about trust for banks – you had no other choice so far. By contrast, Bitcoin not only provides a peer-to-peer network and decentralization, but is also completely trustworthy.

Some experts even claim that Bitcoin is an existential threat to central banks, even calling it “The Napster of Money.” It is also an alternative to the traditional banking business. No-one knows whether cryptocurrencies will outstrip banks in the long run, or remain primarily investment vehicles for speculators. As long as the technology and infrastructure of Bitcoin is not mature, it will not be used too often as a traditional currency. The situation is likely to improve, inter alia, through the Bitcoin Lightning Network.

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